SMITH V. STEWART & 0RS [2000] NSWSC 1224

New South Wales Supreme Court

CITATION : SMITH V. STEWART & 0RS [2000] NSWSC 1224 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 2478/98 HEARING DATE(S) : 29, 30 November & 1 December 2000 JUDGMENT DATE : 19 December 2000

Nicole Louise Smith - plaintiff Robert Edgar Stewart - 1st defendant PARTIES : John Arthur Nurmi - 2nd defendant John Stephen Rhodin - 3rd defendant Estate of Eileen Stewart - 4th defendant JUDGMENT OF : Hodgson CJinEq at 1

COUNSEL : Miss J. Sandford for plaintiff Mr. G. Burton for defendants SOLICITORS : Leigh Virtue & Associates, Sydney for plaintiff Philip J. Beazley, Sydney for defendants CATCHWORDS : TRUSTS - Duties of trustees - Duty not to profit from trust - Duty to ensure trust property used for benefit of beneficiary - Exoneration of breach - 19-year-old girl obtains damages verdict - Father becomes trustee of proceeds - Proceeds used to purchase and improve house in which family lived - Contributions to improvements by father - Whether father should be reimbursed - Beneficiary moves away from house, receives no benefit from property for six years - Whether breaches of trust - Substantial capital gain - Whether father should be exonerated. LEGISLATION CITED : Trustee Act 1925 s.85 DECISION : See end of judgment

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

CORAM: HODGSON, CJ in Eq.

Tuesday 19th December 2000

NO. 2478 OF 1998 SMITH V. STEWART & ORS.

JUDGMENT

1 In 1974, the plaintiff, then aged 9, was injured in a motor vehicle accident. In 1984, the plaintiff was awarded damages of $296,613.00 in respect of that accident. On 8th March 1985, the first defendant Robert Stewart (the plaintiff's father), the second defendant John Nurmi (an accountant and friend of Mr. Stewart), and the third defendant John Rhodin executed a deed acknowledging that they held $292,533.00 together with interest accrued thereon on trust for the plaintiff. The reason for setting up the trust was that, at that time, it seemed that the plaintiff was and would remain unable to manage her affairs. Most of the trust money was used in the purchase and improvement of a house property at Clareville, purchased in 1985 for $180,000.00. Between 1985 and 1992, the plaintiff lived at this house with her father, her step-mother Aileen Stewart, and her half-brother Julian. 2 In 1992, the plaintiff left that house, and since then has lived away from it. Mr. Stewart continued to occupy the house until he separated from his wife Aileen in 1996. The plaintiff married Max Smith on 24th February 1996. Mr. Stewart paid for the wedding, but otherwise the plaintiff received no benefit from the trust or from her father after she left the house in 1992, prior to her commencing these proceedings on 20th May 1998. 3 In these proceedings, the plaintiff seeks the transfer of the trust property to herself, and remedies for alleged breaches of trust by Mr. Stewart and Mr. Nurmi. Mr. Rhodin has not participated in the proceedings: no remedy is sought against him, and no point is taken about his absence from the proceedings.